Rick are you saying that the dollar could just be scrapped in “a moment of epiphany”, but aren’t deflationist (of which you claim to be) saying that cash will be king? Why would the government scrap a currency if it was actually deflating? Doesn’t sound like any way to treat a sovereign.
paul ryeJan 30, 2009 @ 20:26
I’ve never heard anyone claim the Fed tightened credit after the market crash in 1929. My impression was that the Fed eased after the market crash but it did no good, just as it is doing ono good today. I think the Austrian school explanation makes the most sense. It is not what the Fed did after the ’29 crash that matters, or what it is doing after the ’08 crash; it is what it did in the years before the ’29 crash and the eight years before the ’08 crash – lowered interest rates, and allowed credit to expand unchecked. It’s the interaction between banks, businesses, and individuals in the aftermath of a market crash and in a rapid change from easy credit to a credit crunch that causes a depression, I think.
Today, with the banks and so many people and businesses are all underwater debt-wise and in fear of even more asset price deflation, bank lending and individual borrowing seem like bad ideas. Only businesses wish to borrow and borrow short-term or do long-term refinancing at lower rates. So, you could say the Fed is easing, but the banks have tightened, and a seismic change in attitude toward debt has taken place. Which is why it appears the deflationary depression scenario is still possible no matter what the Fed does.
The ending of “Rollover” is how I’ve always pictured it too, John. I guess that will be it for all of us guys who have leveraged the miracle of electronic trading to eke out a parasitic living without having to shave or change our socks. I also agree about the dollar becoming worthless, not over time, but in a moment of epiphany. The scary thing — scary because it is true, no matter what anyone on CNBC says — is that that this could happen at any time.
john hartmannJan 30, 2009 @ 9:24
I have been a gold person since the nineteen eighties. It took me that long to figure
out the government quit baacking our dollar with gold or silver.
When the dollar becomes worthless, it won’t be over a period of years, months or
weeks. It will be in a matter of hours when foreign powers pull their money from
the US banking system. I watch the movie “Rollover” every once in a while just to keep my perspective on the what can happen at any time in the financial world.
Some day we may have to start all over again. As the movie ends, “You’ll need
a partner.”
Comments on this entry are closed.
Rick are you saying that the dollar could just be scrapped in “a moment of epiphany”, but aren’t deflationist (of which you claim to be) saying that cash will be king? Why would the government scrap a currency if it was actually deflating? Doesn’t sound like any way to treat a sovereign.
I’ve never heard anyone claim the Fed tightened credit after the market crash in 1929. My impression was that the Fed eased after the market crash but it did no good, just as it is doing ono good today. I think the Austrian school explanation makes the most sense. It is not what the Fed did after the ’29 crash that matters, or what it is doing after the ’08 crash; it is what it did in the years before the ’29 crash and the eight years before the ’08 crash – lowered interest rates, and allowed credit to expand unchecked. It’s the interaction between banks, businesses, and individuals in the aftermath of a market crash and in a rapid change from easy credit to a credit crunch that causes a depression, I think.
Today, with the banks and so many people and businesses are all underwater debt-wise and in fear of even more asset price deflation, bank lending and individual borrowing seem like bad ideas. Only businesses wish to borrow and borrow short-term or do long-term refinancing at lower rates. So, you could say the Fed is easing, but the banks have tightened, and a seismic change in attitude toward debt has taken place. Which is why it appears the deflationary depression scenario is still possible no matter what the Fed does.
The ending of “Rollover” is how I’ve always pictured it too, John. I guess that will be it for all of us guys who have leveraged the miracle of electronic trading to eke out a parasitic living without having to shave or change our socks. I also agree about the dollar becoming worthless, not over time, but in a moment of epiphany. The scary thing — scary because it is true, no matter what anyone on CNBC says — is that that this could happen at any time.
I have been a gold person since the nineteen eighties. It took me that long to figure
out the government quit baacking our dollar with gold or silver.
When the dollar becomes worthless, it won’t be over a period of years, months or
weeks. It will be in a matter of hours when foreign powers pull their money from
the US banking system. I watch the movie “Rollover” every once in a while just to keep my perspective on the what can happen at any time in the financial world.
Some day we may have to start all over again. As the movie ends, “You’ll need
a partner.”